Producers seek options amid shutdowns

Marketing livestock became more complicated with the global COVID-10 pandemic. Factor in plant shutdowns due to the virus, and selling hogs and cattle just became even more challenging.

“We’ve had shutdowns in the past, but that was typically one plant and the others were operating normally, so they could absorb that volume,” says Lee Schulz, Extension livestock marketing economist with Iowa State University.

“With this situation, it’s not a single plant, and that makes it more difficult.”

Hog processing plants in Columbus Junction, Iowa, and Sioux Falls, S.D., had temporarily shut down or indefinitely suspended operations as of April 14. Beef processing plants in Tama, Iowa, and Greeley, Colorado, also temporarily suspended operations due to a large number of employees being diagnosed with COVID-19.

“It’s a huge challenge when you back up all this meat, especially pork,” Schulz says. “With cattle, you have more options as far as placements and marketing. You don’t have that with pork or poultry.”

Even though cash and futures prices already look bleak, there is still some downside risk in the livestock market, says Derrell Peel, Extension livestock marketing economist with Oklahoma State University. He advises producers to keep an eye on risk management opportunities, since they will likely be few and far between this year.

“The bulk of the impact is already here,” Peel says. “Some producers had coverage in January and saw that benefit, but others did not.”

He says prices could drop even more over the next few weeks. Peel says feeder cattle sales were down in March as more producers hang on to calves.

“Once we get past this and prices don’t go a lot lower, that’s when we’re probably at the bottom of all this,” he says. “Of course, we’re going to be coming out of this virus in a recession, so there will be challenges.”

Peel says some feedlots could choose to feed cattle enough to maintain weight. He says cattle numbers are usually seasonally higher this time of year, resulting in more beef destined for grills and restaurants.

“We essentially have about half of the market shut down because of the closing of the food service industry,” Peel says, adding beef destined for restaurants is now being moved into the retail sector.

Further disruptions with packing plants could make the situation even worse, he says, adding any slowdown could result in a brief shortage of meat.

“We’ve never had a situation where we’ve seen a reduction in plant operations across multiple species,” Peel says. “In this environment, everything can change quickly.”

Schulz says wholesale and retail meat prices could increase with more plant shutdowns, while at the same time the price at the farm level is decreasing.

He says it is imperative producers stay as current as possible when marketing, adding plant shutdowns and low prices make that a challenge.